How to save ₹50 lakh in 10 years from monthly SIP


Mutual fund calculator: SIP or Systematic Investment Plan is an investment instrument that enables an investor to invest a fixed amount at regular intervals in mutual funds scheme. The intervals can be monthly, quarterly or half-yearly. So, those who don’t have a lump sum amount for investment can invest in SIP mode for long-term and accumulate an amount that can meet its major investment goal like higher studies of the child, child marriage, retirement fund, etc.

For example, Ravi Ujjwal has a 6 year old son and he is looking for an investment plan that can help him grow 50 lakh for his son’t higher studies. He don’t want to invest in direct stock market as it is very difficult to asses the market situation at the time of withdrawal. Ravi wants to accumulate this wealth in next 10 years as it would give him some breathing space ahead of his son’s higher studies.

On whether his investment goal is viable or not; Pankaj Mathpal, MD & CEO at Optima Money Managers said, “The investment goal is viable but the investor will have to be a disciplined investor. As the investor don’t want to go for the stock market, which is right as it is hard to speculate market condition at the time of withdrawal, one has just one other option, which is mutual funds that can give an average return of the market performance during the investment period. And it can be started any time. So, one should go for the mutual funds SIP for next 10 years.”

However, Pankaj Mathpal said that simple mutual funds SIP in monthly mode might not help an investor to meet his investment goal as the monthly investment amount will be very high. But, annual step-up will help the investor to keep monthly SIP at lowest level in early phase of investment.

On what should be the ideal annual step-up in one’s SIP; Kartik Jhaveri, Director — Wealth Management at Transcend Capital said, “Ideally annual step-up of 10 per cent is advised for long-term investment but for meeting an ambitious target with least possible monthly SIP, one can maintain 15 per cent annual step-up as well.”

On how much return one can expect from a 10 year monthly SIP, Kartik Jhaveri of Transcend Capital said, “It is difficult to give exact figure but one can expect around 12 per cent annual return on one’s money after 10 years of SIP.”

Mutual fund return calculator

So, assuming 12 per cent annual return and 15 per cent annual SIP step-up, if an investor want to accumulate 50 lakh in 10 years, he or she will have to start with monthly SIP of around 12,500.

As per SIP calculator, this 12,500 monthly investment will help the investor to accumulate around 50,15,435. However, both the experts said that one should start with 500 more in one’s monthly SIP, as it will bring the risk-reward ratio in favour of the investor.

Courtesy: piggy SIP calculator

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Courtesy: piggy SIP calculator

Hence, starting with mutual funds monthly SIP of 13,000 with 15 per cent annual step-up will enable an investor to accumulate 50 lakh in 10 years.

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